Investments in business development are declared by 77% of companies in the Central and Eastern European (CEE) region, compared to an average of such declarations of 80% in the European Union as a whole and against 81% in the US, according to a European Investment Bank (EIB) survey. Of the CEE countries, companies from Poland (22%), Slovenia (19%) and the Czech Republic (17%), investing in the development of new products or services, allocate the largest share of funds for innovation.
The EIB has published the results of a study on the level of investment in companies in the CEE region, “Updating the Business Model: are CEE companies investing enough?”. The analysis was published as part of the SGH Report, which will be presented at the Economic Forum in Karpacz (September 5-7, 2023). As the bank points out, the results indicate that investment activity is recovering from the crisis caused by the pandemic and the outbreak of war in Ukraine.
“Investment by CEE companies in product and service innovation is at a higher level than the EU average. This is a positive trend that will certainly result in the dynamic development of the region, create new jobs and definitely increase our competitiveness on the international market,” said EIB Vice President Teresa Czerwinska.
The percentage of companies intending to bet primarily on innovation of new products and services in CEE (27%) exceeded the result recorded in this regard in the EU (24%) and the US (21%), the bank pointed out.
“Companies in the CEE region, after the crises caused by the pandemic and the outbreak of war in Ukraine, are returning to the path of growth. The vast majority of investments are related to replacing or increasing production capacity, which will allow them to become more efficient and more environmentally friendly in the future,” added EIB chief economist Deborah Revoltella.
In contrast to EU and US companies, companies operating in the CEE region allocated a larger share of their investments to machinery and equipment (53% vs. 49% in the EU, 47% in the US), and a smaller share to intangible assets (24% vs. 37% in the EU and 33% in the US).
The main investment goal of companies located in the CEE region remains the replacement of production capacity – similar to the EU average (46% of companies in CEE and the EU). This is followed by capacity expansion (25% in CEE) and innovation (17%). Manufacturing companies (20%) and large organizations (18%) invest relatively more in innovation. Companies from Poland (22%), Slovenia (19%) and the Czech Republic (17%), investing in the development of new products or services, allocate the largest share of funds for innovation, according to the report.
The most frequently cited long-term barriers to investment in the CEE region are uncertainty about the future (87%), energy costs (87%) and availability of skilled workers (82%). The results averaged for the EU are similar, it was also reported.
The largest share of financing among CEE companies in 2022 was own funds (70%), followed by external sources (25%), with group financing accounting for an average of 4% of overall corporate investment in CEE. The percentage of companies using external financing is highest in Romania (32%), and lowest in the Czech Republic (18%), the report reads.
Three-fourths (75%) of companies that say they use external financing obtained bank loans in the last fiscal year, of which 21% of companies obtained a loan on preferential terms. There are significant differences among countries in the region: preferential bank loans are most common in Hungary (39%) and the Czech Republic (36%) and Romania (36%), and least common in Latvia (5%) and Poland (7%) and Estonia (8%), the EIB also reported.
The EIB Investment Survey, the European Investment Bank’s annual flagship report, includes the results of the EIB’s annual investment survey, which includes responses from some 12,500 companies across Europe to a wide range of questions on corporate investment and investment financing, and includes a survey of EU municipalities.
Source EIB and ISBnews
